From Carbon Signals to Crypto Waves: Tail Spillovers in the Energy Transition

Lidong Pang; Jianqiang Qi

Abstract

As the global energy transition unfolds, carbon markets and energy cryptocurrency markets collectively mirror the evolving economic and regulatory forces that are reshaping the future of energy systems. This paper employs a novel Quantile-on-Quantile connectedness approach explore the dynamic connectedness of European Union Allowance and renewable energy token with dirty energy. The results reveal a markedly state-dependent spillover structure in which cross-market influence intensifies in the tails of the return distribution, while linkages remain muted in ordinary market states. We also find that dirty energy tends to absorb rather than transmit shocks, particularly when carbon prices or clean-token valuations reach elevated levels, which suggests a growing disciplinary role of decarbonization assets in fossil-fuel pricing. A comparison of direct and reverse quantile configurations shows persistent dominance of carbon price movements over dirty energy, while leadership alternates over time between renewable-token markets and fossil-fuel markets. These findings refine the understanding of transition-risk propagation and offer guidance for portfolio design and market-stability assessment.

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